Food and beverage sector ripe with acquisition opportunities

Now is the time for mid-sized food and beverage businesses to formulate growth plans or exit strategies, in order to maximise the benefit of the increasing number of acquisition and divestment opportunities available in the sector, according to business advisory firm Grant Thornton.

The recently released Grant Thornton Food & Beverage Deal Tracker Report, ‘Bite Size’, revealed that despite difficult market conditions globally, Australia has had more food and beverage acquisition targets than any other country in the Asia Pacific region. Australian also ranked as having the fifth highest level of food and beverage transactions globally during the period in January 2011 to March 2014.

“Acquisition opportunities within the Australian food and beverage sector are receiving interest from local, international and private equity buyers,” said Cameron Bacon, Food and Beverage Partner, Grant Thornton Australia. “Fuelled by the sector’s prime position to service Asia’s growing demand for high quality food products, CEOs and owners within the sector need to ensure their businesses are well positioned to capitalise on current opportunities within the sector,” he said.

Most transactions targeted by local buyers

While private equity and international interest is strong, Grant Thornton said the sector saw most of its transactions targeted by local buyers. This finding supported prior research from Grant Thornton’s ‘Hunger for Growth Survey’, which indicated approximately two thirds of Australian businesses within the sector had intentions to either sell or acquire a business over the next twelve months.

“We’re seeing buyers heavily focused on the food segment which makes up 75 per cent of total transactions in the sector,” Mr Bacon said.

Strong brands, premium segments vital

The report also revealed higher valuation multiples were achieved by businesses with strong brands in premium segments.

“As the trading and transaction multiples of Australian food and beverage companies are often lower than equivalent companies in North America or Europe, we will continue to see strong interest from international buyers seeking the opportunity to purchase good quality companies for a reasonable price that are well positioned to benefit from growing Asian demand,” Mr Bacon said.